Shares Of Caesars Entertainment Plunge 40% Amid Battling Billionaires

Billionaire money man Marc Rowan had a bad day on Wednesday. The co-founder of private equity firm Apollo Global Management has been working for years to salvage some value out of the soured $30 billion leveraged buyout of Caesars Entertainment, the biggest casino company in the U.S., but a federal bankruptcy judge dealt Rowan a big setback.

U.S. Bankruptcy Judge A. Benjamin Goldgar ruled in Chicago on Wednesday that Caesars Entertainment could not delay or avoid lawsuits from creditors of the company’s main operating unit, which has already filed for bankruptcy court protection.

Shares of Caesars Entertainment plunged by 40% in afternoon trading on Wednesday—a blow to its big shareholders like Apollo and billionaire David Bonderman’s TPG, the other private equity firm that backed the initial leveraged buyout of what was then called Harrah’s Entertainment. Other big shareholders of Caesars include billionaire John Paulson’s hedge fund.

Rowan and Apollo are skilled distressed debt investors and know how to maneuver shrewdly in restructurings and bankruptcy court. But Caesars has been a billionaire battleground. Rowan has been up against equally sophisticated hedge funds like billionaire Paul Singer’s Elliott Management and David Tepper’s Appaloosa Management, which bought discounted debt of Caesars' main operating company. The representatives of some of the creditors of the already bankrupt unit have launched lawsuits claiming that Caesars’ private equity owners, Apollo and TPG, improperly transferred assets out of the operating company before pushing it into bankruptcy court.

One of the companies that received assets in the disputed transfer deals is Caesars Acquisition Company. It is publicly-traded and the stock fell by 12% on Wednesday—although it fell much more sharply immediately following the ruling and then bounded back. Nevertheless, stock traders clearly think creditors will now go after some of Caesars’ Acquisition’s assets.

Rowan can never been counted out, but the ruling will make his restructuring efforts harder and makes it more likely that Caesars Entertainment ends up in bankruptcy court itself. In a statement, Caesars said: "We believe our defenses in the New York litigation are strong, and will continue to contest those cases vigorously. The bankruptcy court's ruling was a technical interpretation of bankruptcy law and did not address in any way the merits of the New York litigation."

The man who is probably breathing the biggest sigh of relief on Wednesday: Leon Cooperman, the billionaire hedge fund manager whose Omega Advisors hedge fund was a big shareholder in Caesars until Cooperman dumped the entire position in early June.